It is not needed, nor fitting here [in discussing the Civil War] that a general argument should be made in favor of popular institutions; but there is one point, with its connections, not so hackneyed as most others, to which I ask a brief attention. It is the effect to place capital on an equal footing with, if not above, labor, in the structure of government. It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor. This assumed, it is next considered whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them, and drive them to it without their consent. Having proceeded thus far, it is naturally concluded that all laborers are either hired laborers or what we call slaves. And further, it is assumed that whoever is once a hired laborer is fixed in that condition for life.
Now, there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.
- Abraham Lincoln
Credit unions have two big differences:
Wouldn't the depositors still want a high interest rate? That would still incentive the same sorts of loans as current banks.
In practice, no. Depositors often take out loans at the same credit union, so they have incentive to keep it low. Even if they don't, the credit union is still one of many, and has to compete for market rates.
Generally, compared to traditional banks, credit unions in the real world have a slightly lower interest rate for loans, and a slightly higher interest rate on deposits.
Isn't fractional reserve banking using most of your deposits to make investments? If that is what you're taking about, I don't see how credit unions could give loans at all, since they'd need to keep all the money on hand. Am I misunderstanding what you're talking about?
https://en.m.wikipedia.org/wiki/Fractional-reserve_banking
Fractional reserve means they don't need to back up every dollar of a loan with a dollar in deposit. Say they get $10 dollars in deposits. They might give out 10 loans of $9 dollars each based on that deposit. $90 was put into the economy based on $10 in deposits.
This also chains to other banks. Each of those $90 will likely end up in a bank (same one or another one) as a deposit. That bank can now do the same thing. Fractional reserve thus greatly multiplies the amount of money in circulation well beyond what the central bank actually issues.